The Volcker Rule and its Consequences for the Financial and Banking Essay

The Volcker Rule and its Consequences for the Financial and Banking System - Essay ExampleFederal Reserve has publicly denote that the banking system of US does not need to accept and operate according to the eclipse before the calendar month of July of 2014 but the banks leading suck to conduct the process of good faith planning efforts to get build to accept the rule in the future and during the temporary phase. As banks and the financial system is noneffervescent not aw ar of the bans that will be levied, there will be a cloud of uncertainty that these systems will discover for two years (Ciro 2012). These systems are experiencing ambiguity in understanding what does the Federal Reserve mode by good faith planning efforts. The ambiguities are making condition worse thus closing makers should make the scenario clear and present the effects of the rule on US and early(a) nations. The cloudy moorage was made clear when a draft of the regulation was prepared and this draf t consisted of details regarding the services offered by financial system and the way these services are used by the common public. The situation is still quite unclear for financial institutions as even the draft wasnt clear enough to name the effects that the rule will have on financial sector. The European Union and other countries have even showed concerns as they expect that the rule will decrease the liquidness in world financial markets, thus it is quite clear that the rule will impact the financial systems negatively. Body The delay in implementing and clearing the effect of the rule may not help the banks and make situation worse as banks do not have the correct idea of when the rule will be implemented and banks will have to accept the rule legally regardless of whether they understand its effect or not. Legally it is declared that those banks that have operated in good faith effort during the temporary implementation phase will experience less problems in complying with the actual rule. The policy makers should make the scenario clearer instead of making the financial system of US and overseas operate according to their own guess work. The delay is making the financial system hold up decisions under ambiguous situation which is already hurting the system. Volcker Permitted Bank Activities According to the rule there are certain permitted activities that can be performed by the banks, these activities comprise of banks acting as market maker, underwriter, hedger, deals of government securities and other activities that are stated under the act as permitted activities. These activities have been permitted to ensure that banks continue to provide liquidity to the markets and help companies in raising capital. But these activities have been restricted to ensure that banks do not brood the line and the funds with the bank do not become un strong. If the permitted activities cannot be conducted in a safe environment and without risky conditions, then the federal system has the right to barge banks from conducting such activities or addition charges and fines on these activities so these activities become unfavourable to the banks. The activities that have been stated as acceptable in the rule are done on the basis that the bank conducts these activities for the customer and only to meet the short marge demands of the customers. Rule Effect The Volcker Rule has received its name from the Paul Volcker who was the Federal Reserve Chairman during the limit of the financial crises of 2008. The